Update: This Kotaku story citing an unnamed Microsoft rep. notes that the Kinect does not have to be on all the time:

"Yes, you can turn the system completely off," the Microsoft rep said. "This would use no power and turn everything off. We’ll share more details about how it all works later." Article author Stephen Totilo speculates that this involves pressing the console's power button.

The rep. goes on to say that the Kinect will offer custom privacy settings for those concerned about privacy issues.

Original story: Germany's federal data protection commissioner Peter Schaar is not too pleased with what he has heard about the new Kinect for Xbox One, calling it a "monitoring device" in one media report in German newspaper Spiegel. The nature of the new Kinect to be always on and ready to react to a user's every action concerns Schaar deeply:

"Reaction rates, my learning or emotional states. They are then processed on an external server, and possibly even passed on to third parties. Whether it be deleted ever, the person concerned cannot influence."

And while Microsoft has assured the press that has asked about privacy issues that they will protect data collected from the device, others think it is a new avenue that could be used by governments and law enforcement to collect voice and video data from consumers.

For example, in Australia's Civil Liberty Director, Tim Vines also thinks that the Kinect could have an impact on privacy. He believes that the device should be able to be shut off if that's what consumers who are concerned about the information it collects want.

"People should have the ability to turn off the camera or microphone, even if it limits the functionality of the machine," [privacy is] "all about control".

“Of course, if Microsoft doesn't allow that (control), then people should vote with their wallets and skip the next Xbox."

He goes on to say that the Kinect meets the definition of a surveillance device in Australia:

"Microsoft's new Xbox meets the definition of a surveillance device under some Australian laws, so they need to be upfront and tell customers whether anyone else can intercept their information or remotely access their device," Vines said.

With rumors surrounding a patent owned by Microsoft that uses the Kinect to count how many people are in the room when watching a movie or other entertainment, you can understand why some people are concerned about the capabilities of the device to collect data that could then be shared with all kinds of entities.

With laws like CISPA and the FBI seeking greater powers to collect data many see the Kinect as just one more avenue for law enforcement and the government to keep tabs on what we are doing should we somehow find ourselves on the business end of a court order...